Sendero residents could face hefty Mello-Roos fees

April 1, 2013

Updated Aug. 21, 2013 1:17 p.m.

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Homes are under construction as part of Rancho Mission Viejo's Sendero village. The new community will have around 940 attached and detached homes and 290 apartment homes when it's complete. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

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Construction is expected to be complete this summer on the first phase of Rancho Mission Viejo's new development. The Sendero village will likely use Mello-Roos taxes to finance support services such as utilities and public safety. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

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Rancho Mission Viejo's Sendero village encompasses around 690 acres of land. The community will host a grand opening this summer, as the first of 940 single-family homes and 290 apartment homes go on sale. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

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Construction is currently under way at Rancho Mission Viejo's Sendero village, which is scheduled to open this summer. The community will likely include Mello-Roos taxes to support services such as public safety and roads. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

Homes are under construction as part of Rancho Mission Viejo's Sendero village. The new community will have around 940 attached and detached homes and 290 apartment homes when it's complete. ISAAC ARJONILLA, ORANGE COUNTY REGISTER

What is Mello-Roos?

Mello-Roos is a special tax billed to everyone within designated areas known as community facilities districts. The taxes pay for services such as utilities, roads, public safety, schools and recreation.

Sen. Henry J. Mello and Assemblyman Mike Roos drafted the law in 1982 in the wake of Proposition 13, which limited governments' ability to raise property taxes. Rather than force builders to pay upfront for needs their developments trigger, Mello-Roos allows government agencies to bond for those projects and pay off the debt through extra taxes collected from residents over decades.

Any California county, city, special district or school district can form a Mello-Roos district with approval from two-thirds of residents. However, most Mello-Roos districts are created before communities are built, when the landowners – often a single developer – can give the OK.

Services the tax would finance

The Mello-Roos district would help provide services for Sendero residents including:

•Water and sewer facilities, such as wells, reservoirs and pipelines that would be owned by Santa Margarita Water District;

•Transportation facilities, such as bridges, roadways and traffic signals that would be owned by Orange County;

•Public safety facilities, such as sheriff's and fire substations and equipment that would be owned by the county and Orange County Fire Authority; and

•Recreational facilities, such as hiking trails and libraries that would be owned by the county.

A full list of specific projects and costs is expected to come back before SMWD's board of directors in May.

RANCHO MISSION VIEJO – Homeowners could pay between $1,313 and $5,135 each year on top of standard property taxes to live in Rancho Mission Viejo's Sendero village thanks to a Mello-Roos district proposed for the community.

If the district is approved, buyers fortunate to land in Sendero's cheapest tax zone would be paying $239 more than the average Orange County resident in a Mello-Roos – or community facilities – district. Those in the priciest zone would pay $4,061 more than the county average.

Mello-Roos districts – where residents pay extra taxes to government agencies for services from sewers to fire protection – are common in south Orange County. After the special tax districts law was drafted in 1982, Rancho Mission Viejo enlisted agencies to form community facilities districts as it developed the master-planned communities of Rancho Santa Margarita, Las Flores and Ladera Ranch.

"Rancho Mission Viejo is using the (CFD) because it's a well established method of funding that has been used consistently and successfully over the last 20 years," said Erica Yanchus, spokeswoman for the company.

Supporters say the system helps spur development and supports quality infrastructure for all residents. They also argue that Mello-Roos balances out with reduced monthly mortgage payments, since builders won't be tacking development impact fees onto home prices.

Critics call Mello-Roos an end-run around Proposition 13, strapping residents with debt though they have no say in how the proceeds are spent. Agencies can also raise the special tax by up to 2 percent each year without a vote, and those fees are not deductible as are standard property taxes.

Rancho Mission Viejo requested Santa Margarita Water District form the CFD. SMWD board members last week gave initial approval to the plan. Now Sendero property owners – the nine developers building homes in the community southeast of Ladera Ranch – will vote on the CFD. If at least two-thirds approve, the issue will come back to the SMWD board for a public hearing and final approval, with more opportunities for public comment.

In anticipation of the CFD being approved, the water district also is eyeing a $70 million bond that would be paid back over the next 40 years by the additional taxes tacked onto annual property tax bills for Sendero home and business owners.

More than half of that $70 million would fund water and wastewater projects to service Sendero's anticipated 3,075 residents, according to Andrea Roess with David Taussig & Associates, SMWD's special tax consultant.

The rest of the bonds likely would help pay for transportation projects, recreation services and public safety.

Sendero is under the jurisdiction of Capistrano Unified School District. It's not clear whether the district will sign on to partner with SMWD to build or expand facilities

"The first group of students will initially be accommodated at current sites," district spokesman Marcus Walton said via email, declining to discuss specifics before a plan is approved. "We are still working out the details on providing those facilities with Rancho Mission Viejo."

Santa Margarita is the only water district in Orange County that administers a Mello-Roos tax, according to records from the California Debt and Investment Advisory Commission. SMWD's first district was formed in 1999 to serve the unincorporated community of Talega.

In Sendero, those who own nonresidential property also would pay extra taxes, at a rate of $16,983 to $50,225 per acre each year. The amount is based on the size of the property, Roess said, along with which of the village's 14 zones the property sits in.

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